Your Right to Know

As thousands of Ohioans filed their taxes yesterday, a coalition of business groups continued
its push to make the state’s system of municipal income taxes easier and less costly for businesses
to navigate.

Jack Buschur, president of Buschur Electric in Minster, held up a stack of 43 W-2 forms that he
filed last year. In the fourth quarter of 2012, he said, his company sent out 36 tax returns, 21 of
which were for less than $10. Each costs him $100 to $150 to prepare, he said.

“It’s rather ridiculous that we’re spending this kind of money and getting very little
accomplished,” he said.

Hearings on the bill are expected to restart next week on House Bill 5, which is designed to
make municipal tax laws uniform across the state. Supporters, including a coalition of business
leaders, say Ohio’s patchwork system of municipal income tax laws is the most confusing in the
nation.

But the bill continues to face opposition from municipal leaders, who say it will cost cities
money and change when cities are permitted to start levying an income tax, and on whom.

Mark Cobetto, a CPA and tax shareholder with Schneider Downs & Co. in Columbus, said the
bill would simplify tax filings and replace “nuisance type of compliance.”

“The waste of time in researching hundreds of different municipality rules, and the response
time ... it flusters taxpayers,” he said. “We also think (the bill) addresses issues of fundamental
fairness.”

He pointed to requiring each municipality to have a net operating loss carry-forward period of
five years — which allows it to reduce future tax liability — and uniform interest and penalty
rates. “Some municipalities have exorbitant rates, and they use it as a ‘gotcha’ game,” Cobetto
said.

Though most municipalities already allow for net five-year operating loss carry-forward, 174 do
not, including Columbus. Those cities, the Municipal League says, could suffer significant revenue
loss.

Melinda Frank, the Columbus city tax administrator, said cities don’t have much problem with the
uniformity proposals, but the bill would cost Columbus tax revenue. While some portions of the bill
have changed since it was introduced last year, that revenue loss remains a concern, she said.

“There is tax reform in the bill, not just uniformity language,” she said. “That has the
majority of the negative revenue impact.”

The bill would extend from 12 to 20 days the minimum working days needed before a company would
have to withhold for employees in a particular city; count as a “day” only the city where the
worker spends the most time during a workday; and create a common definition of a resident.

The bill also would eliminate a “throwback rule” that affects the ability of a city to tax
Internet sales and certain other sales made outside the city.

“One of the goals of the bill was to simplify things and it truly doesn’t do that,” Frank said,
adding that she hopes for additional changes, such as splitting tax reforms from uniformity
efforts. “It’s difficult to put the two together, especially when it means revenues are going to be
negatively impacted.”

Rep. Cheryl Grossman, R-Grove City, a lead sponsor of the bill, said she will try to limit as
much as possible the negative revenue impact on cities.

“This issue is about making Ohio more competitive with other states,” she said.